Paxman AB (publ)

This is an executive summary on UK-based and Sweden-listed Medical Equipment company Paxman from CEO and Director Richard Paxman, who will run you through Paxman’s slide deck.

Highlights

• Arrowhead is updating its coverage on Paxman AB with a fair value bracket of SEK 56.7 to SEK 78.2 per share (share price on June 20, 2023: SEK 31.9) based on the Discounted Cash Flow and Relative Valuation methodologies.
• Paxman reported strong results in Q1 2023 with revenue at SEK 42.3 mn, a growth of c. 51% year-on-year (YoY). The recurring revenue was at SEK 23.7 mn, an increase of 43% YoY. The company generated a positive EBITDA of SEK 2.7 mn during the period, compared with an EBITDA loss of SEK 2.9 mn YoY, driven by strong revenue growth in Q1 2023. The company incurred a net loss of SEK 2.5 mn as compared with a loss of SEK 6.2 mn YoY, primarily due to higher depreciation on capital investments in the US. The cash flow from operating activities improved to SEK -1.8 mn as compared with SEK -3.4 mn in Q1 2022 due to strong revenue growth in Q1 2023.
• PAX plans to advance its reimbursement strategy in the US, as the customers have shown interest in the ‘buy and bill’ model in FY 2022 to facilitate reimbursement with CPT lll codes. The company plans to continue investing in the research and development (R&D) pipeline in scalp cooling and cryotherapy to prevent Chemotherapy-Induced Peripheral Neuropathy (CIPN). According to the CEO, the company spent c. SEK 5.0 mn on the CIPN R&D program in the past 12 months. However, this investment is expected to be minimal in the future. Strong revenue growth and reduced CIPN investment will put the company in a better financial position.
• The company intends to accelerate its growth worldwide by expanding its sales model through direct distribution and established distribution partners in key regional markets. Paxman is already established in Asian markets such as India, Malaysia, Singapore, and Pakistan, while Japan will continue to be a strong growth market in the future. The company has signed a letter of intent with Concord Medical in China to enter a distribution and marketing agreement for Greater China, including Macau, Taiwan, and Mongolia. It has recently received market clearance for Paxman Scalp Cooling System (PSCS) use in South Korea, with the final approval for commercialization expected in May 2024.
• Paxman incorporated a new entity, Paxman Canada Inc., in the province of Ontario in January 2023. The corporation will operate on a hybrid business model, offering pay-for-use services through Paxman personnel in large academic and high-volume cancer centers and selling capital equipment to smaller regional cancer centers.
• In January 2023, the company received the European Union (EU) Medical Device Regulation (MDR) certification from the British Standards Institution (BSI). This certification reaffirms the company’s commitment to the market, its customers, and patients who will continue to benefit from the PSCS.
  Paxman is offering a Patient Assistance Program (PAP) to provide affordable medical assistance across the US. The program is in its initial stages and is delivering encouraging results. Of the 203 Benefit Investigations (BIs), 163 patients received positive coverage, representing 80% of the total BIs. Of the remaining patients without insurance coverage, 88% (35 patients) were supported by Paxman’s PAP.
• In the future, the company will continue to transition from selling equipment to clinics to the buy-and-bill model, which will be a key driver of growth in the US market. This, coupled with lower CIPN investment, will enable the company to deliver a strong return on investment, a positive EBITDA, and a push toward positive cash flow by the end of FY 2023.

Highlights:

• PAXMAN announces that the Palmetto Medicare Administrative Contractor (MAC) has issued a Proposed Local Coverage Determination (LCD) for Scalp Cooling for the Prevention of Chemotherapy-Induced Alopecia, recommending coverage for FDA cleared devices.
• This is the first proposed LCD for scalp cooling, marking a significant advancement in support for healthcare providers to receive reimbursement from Medicare for administering scalp cooling therapy.
• The proposed scalp cooling LCD will undergo public review and be discussed at Open Meetings of the Palmetto GBA. If approved, it would establish a pathway for successful reimbursement of Medicare scalp cooling claims in the service area by early 2024.

Highlights:

• Paxman AB is convening an Annual General Meeting of shareholders to be held on Wednesday, May 24, 2023.
• Shareholders who wish to attend the meeting physically must register in advance, providing their name or business name, personal ID or company registration number, number of shares held, address, daytime telephone number, and information about deputies or advisors if applicable.
• Shareholders who cannot attend the meeting in person may exercise their rights by proxy, by providing a written, signed, and dated proxy (original) with a maximum validity of one year, unless a longer period is specified, and attaching a copy of the entity’s registration document or similar authorization document if issued by a legal entity. Proxy forms are available on the Company’s website or can be obtained by email. Proxies, registration documents, and other authorization documents should be provided to the Company in advance of the General Meeting to facilitate entry.

Highlights:

• Paxman’s CEO Richard Paxman conducted several investor meetings in the United States to follow up on increasing investor interest for the company since the engagement with Arrowhead Business and Investment Decisions towards the end of 2022.
• Paxman’s CEO Richard Paxman participated in an export event in Leeds held by the Department for Business and Trade to share knowledge and experience of Paxman’s export journey to the United States.
• The Paxman Scalp Cooling Research Centre hosted a visit from prominent US breast cancer physician Alberto Montero, who visited the center to gain insights into the latest research and developments in scalp cooling technology.

Highlights:

• Arrowhead is updating its coverage on Paxman AB with a fair value bracket of SEK 58.0 to SEK 78.5 per share (share price on March 15, 2023: SEK 35.2) based on the Discounted Cash Flow and Relative Valuation methodologies.
• Despite continued impediments faced in the UK and global economy, Paxman reported another strong quarter with Q4 2022 revenue stood at SEK 40.7 mn, a growth of c. 39% year-on-year (YoY) and a degrowth of 1.4% sequentially. The sequential degrowth was primarily attributed due to the holiday period including Thanksgiving and Christmas and without any new buy and bill launches. EBITDA for the quarter stood at SEK 12.8 mn as compared to SEK 4.2 mn in the same quarter last year. The company incurred c. SEK 16.0 mn as a non-trade forex expense, thereby resulting in widening of net loss of c. SEK 9.8 mn for the quarter as compared to SEK 1.3 mn in Q4 2021. For the full year, FY 2022, net revenue grew by 51.7% YoY to SEK 145.9 mn, up from SEK 96.2 mn a year ago. Despite the increase in operating expenses of c. 38.0%, EBITDA for the full year stood at SEK 16.2 mn, as compared to SEK 2.9 mn a year ago. However, the company incurred net loss of c. SEK 10.3 mn, as compared to a net loss of SEK 12.8 mn a year ago, majorly driven by SEK 16.0 mn non-trade forex expense incurred during Q4 2022.
• The company is actively engaged in discussions and developing strategies to increase the adoption of the ‘Buy and Bill’ model. By the end of 2023, the target is to have 40% of customers operating under this new model. Additionally, the company has introduced a comprehensive service called ‘the Paxman Hub’ which provides full support to healthcare providers in billing their patients’ insurance companies. Under this new business model, providers can benefit from the Paxman Hub’s assistance in verifying patient insurance benefits, identifying necessary information, and determining patient eligibility through the ‘Paxman Patient Assistance Program’ (PAP), the program which is designed to assist patients who are uninsured, underinsured, or citizens of the US with an income level below the US Federal Poverty Level.
• The company has solidified its leadership position in cryotherapy and side effect management with the successful launch of the Scalp Cooling Summit and Scalp Cooling Studies website. In addition, the company has invested in refreshing its brand, which has elevated its positioning. The company remains committed to investing in clinical trials to further develop its understanding of scalp cooling and improve the patient experience and efficacy.
• Paxman has recently announced that it received EU Medical Device Regulation (MDR) certification from the British Standards Institution (BSI). This certification reaffirms the company’s commitment to the market, its customers, and patients who will continue to benefit from the Paxman Scalp Cooling System (PSCS). Also, the company has announced its receipt of market clearance for PSCS usage in South Korea, and it is anticipated that final approval for commercialization will be granted by May 2024.
• The company’s prospects appear promising, with plans to launch operations in Canada during the first quarter of 2023, amidst a market that shows a continued upward trend. In addition, the company has identified Australia, Brazil, India, The Netherlands, and the UK as pivotal markets for development in FY 2023, with considerable growth anticipated in Mexico and Japan.

Highlights:

• Today, Paxman publishes the February issue of its newsletter aimed at shareholders, investors and other interested parties
• This month’s issue highlights that Paxman obtained EU Medical Device Regulation (MDR) certification from its official standards body, the British Standards Institution (BSI), at the end of January
• The newsletter also includes information on several signed contracts and orders in the US, the UK and around the world

Highlights:

• The Group’s sales amounted to 40.7 (29.3) MSEK for the fourth quarter of the year.
• For the full year, sales were 145.9 (96.2) MSEK.
• The Group’s net result totaled -9.8 (-1.3) MSEK for the period October-December, which resulted in a total net result of -10.3 (-12.8) MSEK for the full year.
• EBITDA amounted to 12.8 (4.2) MSEK for the period October-December, and to 16.2 (2.8) MSEK in total for the twelve months of the year.
• Earnings per share were -0.51 (-0.07) SEK for the period October-December, and -0.54 (-0.73) for the four quarters of the year.
• Cash flow before financing activities was -7.8 (-4.7) MSEK for the fourth quarter of the year and -34.0 (-28.6) MSEK for the full year.
• Net liquid assets totaled 21.1 (55.2) MSEK at the end of the period.
• A total number of 528 (401) scalp cooling systems were installed around the world in the first nine months of the year, with the order book containing an additional 217 systems.
• Average Daily Treatment Revenue (ADTR) amounted to 28.54 TUSD (306.09 TSEK) for Q4 2022, corresponding to an increase of 23.5% compared to 23.1 TUSD (204.57 TSEK) for Q4 2021. The figures in SEK have been converted from USD according to the actual exchange rate during each period.
• Recurring income increased from 15.4 MSEK in Q4 2021 to 22.6 MSEK for the same period in
  2022.